Dark Kitchens: Exposed
During 2020, the experience for independent restaurants, takeaways and eateries during the COVID-19 lockdown was dire. Restrictions forced closure for months on end and strapped for income, many struggled to make ends meet, relying only on takeaway and delivery sales, while still shouldering all the running costs such as rent, wages and utility bills.
Many turned to using Delivery Apps, which brought them instant life support has the nation in lock-down relied on home deliveries. The Delivery Apps are well organized and funded, backed with high profiled social media and TV advertising content, their popularity exploded in recent years and Delivery Apps has become the norm to order takeaways.
Prior to Covid, Britons were spending £38 per month on takeaways, home deliveries and meal kits, according to accountancy firm KPMG, a trend that was already growing. But between spring 2020 and spring 2021, the average monthly spend per person reached £53.
Surely the Delivery companies should be satisfied with this trajectory of growth, but something appeared on the radar in recent years in the form of a pop-up kitchen. We have seen pop-up stalls cooking quite nice food at festivals and major street events. No this is something quite different from the off. These kitchens are in small containers (similar to a shipping container or a prefab hut), located in industrial estate car parks, and are usually tucked away hidden from view, surrounded by heras fencing and security. One of these locations is just behind Hornsey station, operated by a well known Delivery App.
Small businesses are now competing with the Delivery Apps.
These containers, called ‘dark kitchens’ or ‘ghost kitchen’, introduce a new concept to the food industry. A dark kitchen is a physical location with a small number of staff working, with no customer facing services, dining areas or waiting staff.
In the UK, we have discovered that all the large Delivery Companies with takeaway Apps are offering meals prepared in dark kitchens. Many consumers are unaware of this type of practice. The Harringay Traders Association (HTA) urge consumers to be more conscientious with their choices, and knowing that if you don’t recognise the food establishment, chances are it is likely to have come from a dark kitchen locally. Even though they’re located locally, are usually run by large organisations. Emphasising the container kitchen model creates unfair competition for the brick and mortar business that employ staff with all the associated overheads. If you want to support local, the best way is to order directly via phone or from the website, thus avoiding all the Delivery Companies and takeaway Apps.
The Chair of the Haringey Business Alliance (HBA), pointed out that the demand for online takeaways has been high during Covid, with the Delivery Apps dominating the market. Noting that the Apps can prioritise the search results, listing their own dark kitchens before the smaller independents. The HBA pointed out that this adds further disadvantages to the small independents.
The rise of the online takeaway industry
Since the pandemic, in London alone, restaurants have sold an extra 900,000 meals a week via popular delivery Apps. According to many small eateries, these delivery Apps have substituted the usual individual advertising efforts of direct leaflets and other promotions. So reliant on such Apps only makes it harder to leave the services which would mean businesses could instantly become invisible to online demand.
The consumer charity Which? also found markedly higher prices for menu items within the App when compared to ordering directly from the restaurant. In some cases, the App was as much as £11.62 more expensive. Which? found that a chicken Shish at one Lebanese restaurant cost £12.95 when ordered direct, but £13.95 - £14.95 when ordered through Apps.
This difference in price is to offset the high commission rate all Delivery Apps charge – sometimes as high as 35% of the value of the total order. The Which? research also found these popular Delivery Apps, which have begun grocery deliveries, are also more expensive than buying from the supermarket directly.
In 2017, one of the largest delivery Apps launched its own scheme to promote the idea of dark kitchens (or ‘virtual kitchens’ as they call them) to a wider audience, by providing hubs where catering businesses are set up solely to make food to be delivered to homes.
Premises such as these do not require a licence to operate, however planning application has to be made for food containers in Haringey. A number of food businesses have registered at locations which were normally used as a car park.
But the key issue with dark kitchens from the onset is the way they have managed to slip though the current licensing requirements, which are not clearly defined for these units. It can be challenged, and in the interim, it’s business as usual.
Dark kitchens and virtual brands often create a challenge for enforcement officers who cannot identify where they are located and who is responsible for shared areas in the communal dark kitchens facilitating more than one brand. We asked the Council about these containers. They responded that those food businesses are required to register with Haringey Council.
According to the council, these businesses also are subject to the same practices as businesses operating in regular shops. The same law and guidance (the Food Safety Act) applies for food hygiene regardless of whether there is a customer-facing part of the business. The Health and Safety at Work Act and its regulations also applies. Food hygiene and working conditions should also be regularly audited and inspected at these locations, as kitchens for food businesses that the Council are aware of would be inspected regularly.
In addition, business rates are payable on occupation of non domestic property. These will need to be paid on units at the site – either by the business/es occupying them or a landlord.
EPOS systems specialist Ibrahim Ahmet, who has more than 35 years of experience in the sector, has called for independent businesses to create their own online delivery channel against these applications. Pointing out that local residents can place orders for businesses through special websites, Ibrahim states that ordering directly to businesses will reduce the cost of delivery for the consumers as well as save businesses from paying high commissions.
Ibrahim said a significant portion of his more than 4,000 customers complained about high commission rates, and that a significant number of his customers did not provide delivery services because they could not afford the high commissions during the lockdown. Ibrahim also stated that a direct order channel would be more easily established between customers and businesses, especially in local regions.
The numbers show strikingly how much the Delivery companies have grown. One of the major Delivery App reports orders rose to 135 million in the first six months of last year as the takeaway platform said the number of orders was up by 58 million, or 76%, compared with the same period in 2020. It now connects customers to 58,000 restaurants in the UK, up from 50,000 at the start of the year.
The value of orders on some platforms more than doubled in the first half of the financial year despite the reopening of restaurants as Covid restrictions eased in their main UK market.